Prepare Now for the Tsunami of New Rules

Nearly two years after the worst of the financial crisis of 2008, financial regulatory reform legislation has been signed into law by President Obama. The Dodd-Frank Act of 2010 officially became law yesterday in a signing ceremony at the Ronald Reagan Building in Washington, DC.  Weighing in at over 2,000 pages, the new Act is chock full of mind numbing details.  However, the most important details are still yet to come. The Act provides authority for regulatory bodies such as the Federal Reserve to create new rules for financial institutions to follow. This will serve to significantly increase the compliance risk for these companies.  Here is what the Wall Street Journal reported yesterday.

The legislation is a major revamp of U.S. financial-market oversight, streamlining regulation and giving agencies such as the Fed much broader authority to deal with the most complex financial institutions. Many of the new rules will depend on regulators to write specific restrictions and regulations, and Bernanke said the onus is on officials to ensure that they are “sufficiently tough that the risk of another crisis is very low.”

Financial services companies should brace themselves for an onslaught of new rules and also should ensure they have the appropriate infrastructure to respond in a quick and efficient way. Much like the formation of a tsunami, the Act is essentially the earthquake preceding the gigantic wave.

Early Preparation is Critical

An article in Wall Street Technology this week emphasizes the need for financial institutions to prepare for the coming wave of new rules and regulations.  Here is a sample of their view.

The Obama administration's new proposals to regulate the financial industry, which respond to calls for greater transparency and oversight, will completely overhaul the way Wall Street firms operate. But even while specific regulations still are being mapped out, it is vital for financial institutions to prepare now to comply with any new rules that may be coming down the road.

Brian Cummings, director of information risk management, Tata Consultancy Services, North America, agrees that it is more essential than ever for firms to consolidate their risk and compliance efforts, rather than to just bolt on new tools. "You can't have IT doing its own thing and accounting doing its own thing too," he insists. "You need to take an enterprise view of risk management and consolidate your efforts." Then firms can use the appropriate tools to analyze their risk exposure, Cummings continues. "That's powerful, as trying to do it on an ad hoc basis makes it very difficult to get a grand view of where you are," he says.

A streamlined, efficient approach to enterprise risk management can yield great cost savings and provide firms with a true competitive advantage over rival institutions.  Wheelhouse Advisors can help craft a cost-effective plan for your company to implement an integrated enterprise risk management program.  Learn more at www.WheelhouseAdvisors.com.